Tennessee Gambling Laws: Breakdown And History

On Nov. 1, legal online sportsbooks will accept their first wagers in the Volunteer State, making history. That’s the latest evolution of the gambling industry in Tennessee, which is actually quite young in comparison to the same in other jurisdictions.

Concerns about responsible gambling have always limited the legal gambling industry in the state. Indeed, that’s why there are still no brick-and-mortar casinos in Tennessee.

Those efforts haven’t been wildly successful at limiting the growth of gambling, however. On top of wagering on sporting events, Tennesseans can bet on horse races, buy lottery tickets, and play daily fantasy sports games.

It’s unclear when gambling in Tennessee will expand again or what that will look like. If the recent past is any indication, however, the status quo won’t remain in place for long.

Tennessee’s laws on sports betting

There is a legal way to bet on sporting events in the Volunteer State. Just like with almost any other regulated activity, however, there are requirements and restrictions. That goes for both bettors and sportsbooks.

How do I know if I’m eligible to bet in Tennessee?

The two main requirements have to do with age and location. You must be at least 21 years of age and physically located within the state when you place your wager.

You do not have to be a legal resident of Tennessee to place a bet. Depending on relationships you have and/or what you do for a living, you might be ineligible to wager on certain events, however.

Tennessee law bars certain state officials from wagering. Additionally, if you work for a college athletic
department
or a professional sports team, you can’t place bets on events involving those organizations. For example, if you’re a coach for the Volunteers football team, it’s illegal for you to wager on Tennessee games.

That goes for family members and anyone close to those individuals as well. The logic behind those restrictions is similar to laws against insider trading on the stock market. You may have access to insider information that will give you an edge.

You’re free to bet on other sporting events that you don’t have insider access to, however. If you’re uncertain about your eligibility, the sportsbook you’re considering wagering with and the Tennessee Lottery are there to assist you. It’s better to err on the side of caution, and there’s nothing illegal about inquiring about your eligibility.

How do I know if the sportsbook I’m looking at is legal in Tennessee?

There is one easy way to tell. At the bottom of the landing page of the sportsbook website or at the bottom of the app, there will be a statement that says the book is licensed by the Tennessee Education Lottery (TEL). If no such disclaimer exists, it’s safe to assume the sportsbook isn’t legal in Tennessee and is offshore.

So far, the Tennessee Lottery has only licensed four sportsbooks. Those are:

  • Action 24/7
  • BetMGM
  • FanDuel
  • DraftKings

The law does not limit how many licenses the TEL can issue. For that reason, many more may be on the way. It’s important to note that if the book isn’t licensed by the TEL, it’s illegal to wager with that book in Tennessee.

What is the tax rate on sportsbook revenue in TN?

The state assesses a 20% privilege tax on aggregate revenue collected by licensed sportsbook operators. Aggregate revenue is what’s leftover after sportsbooks payout winnings and use other tax credits.

The state does not assess that upon bettors’ winnings. Rather, it’s the sportsbooks who pay that tax. The IRS does consider gambling winnings income, however, so you’ll most likely have to report them on your personal income tax returns.

This tax isn’t the only way the state collects revenue from sports betting, however. It also collects fees for licensure. For an operator, like Action 24/7, that’s $50,000 upfront just to apply for a license.

It then costs another $700,000 to purchase the license after approval. Operators must pay the same $750,000 on the anniversary of their licensure each year as well.

What’s the deal with this hold requirement I’ve heard about?

Tennessee is the first state, so far, to legalize sports betting with what’s called a “payout cap”. The state requires sportsbook operators to hold at least 10% of handle, capping payouts at 90% of the dollars wagered.

Proponents of the requirement argued it ensures that the state will get a decent return on the privilege tax. Opponents stated that it will harm Tennessee sportsbooks’ ability to compete with illegal books and books in neighboring states.

When it enacted the provision, the TEL said it would revisit the cap after the first year of wagering. As it’s not written into the actual statute, the TEL is free to adjust or repeal the requirement at its discretion.

What does official league data mean?

TN law requires sportsbooks to use official league data to settle their in-game or live wagers. Licensees are free to use any service they choose to settle futures and pre-game bets, however.

Essentially, an official provider of data is just one that has received that status from the appropriate governing body for the sport concerned. So, for example, if you were betting on how many points Ja Morant would score in a quarter of a game, the sportsbook would have to use data from a provider with recognition as “official” from the NBA.

The logic behind this is it ensures that everyone is getting the same information at the same time. There’s no research to suggest that “official” data is in any way better than “unofficial,” however. It’s just a label, but an important one.

Are there any other restrictions for sports betting I should know about?

Bettors in Tennessee might run into one particular restriction for legal wagering more than any other. It has to do with bets on college sports.

Tennessee sportsbooks cannot take live prop bets on college sporting events.

For example, you can’t wager on how many offensive yards the Vanderbilt Commodores will accrue over the course of the next quarter. Pre-game props are fine, however.

Tennessee law also bars sportsbooks from extending credit to customers. That doesn’t mean you can’t use your credit card to fund your account. It just means the sportsbook itself can’t issue credit.

There are no legal brick-and-mortar sportsbooks in the state. That’s unlikely to change anytime soon as well.

Sporting events aren’t the only thing you can legally bet online on in the Volunteer State, however.

Horse racing laws in Tennessee

Although there are no race tracks or off-track betting sites in the state, many online racebooks will accept wagers from Tennesseans. It’s a legal “grey area.”

The state explicitly authorized horse racing in 1987. The government repealed that law in 2015, however. They did not replace it with one that explicitly outlaws online betting on horse races, so it’s up to the racebook whether to accept your bet.

So while the state is likely not going to actually prosecute anyone for betting on horse races online, don’t be surprised if a racebook declines to accept your wager because you’re located in Tennessee. It’s totally up to their discretion at the moment.

Casino laws in Tennessee

In-person and online casino slots and table games are illegal in Tennessee. Despite the legalization and the pending launch of sports betting, there’s no momentum in the state to change that right now.

With Virginia possibly set to offer physical casinos soon, that may change some minds on this eventually. For the foreseeable future, however, this is a non-starter issue in Tennessee.

Tennessee’s legal framework for DFS

In 2006, the state legalized daily fantasy sports (DFS) contests. For that reason, most DFS operators happily accept entries from players in the Volunteer State.

It’s not as heavily regulated as sports betting. For instance, DFS game providers don’t have to acquire a license from the state or hold a certain percentage of the entry fees they collect.

In 2019, the state also authorized March Madness pools. The law caps buy-ins at $25 and prize pots at $1,000. Additionally, only individuals can conduct these pools.

DFS and sports betting are the extent of explicitly legal online gambling in Tennessee.

There is yet another form of in-person gambling that Tennesseans can legally take part in, though.

Multi-state and Tennessee lottery laws

In 2002, Tennessee voters authorized gambling in the state for the first time. In 2004, the Tennessee Education Lottery sprang to life. The TN lottery is also part of the Multi-state Lottery Association.

That means you can play national games like Mega Millions and Powerball in the state. The TN lottery also has its own menu of games you can buy tickets for.

You can only purchase those tickets in person, however. While the TN lottery does have an app and website that you can use to prepare your play slip for certain games, you must finish the transaction at a brick-and-mortar lottery retailer.

If you run a non-profit organization, you can file a request to hold a charity gambling event. With such approval, non-profits can offer games like bingo to raise money for charitable causes.

What about poker games in the Volunteer State?

By and large, it’s illegal to play poker for money in Tennessee. That applies to home games in a private residence among friends, just as much as it does to an organized game run by a business.

Just like with slots and table games, the passage of time may change the law on this front. A look at the overall timeline for gambling expansion in Tennessee reveals how the last two decades have seen a lot of activity.

Tennessee gambling through the decades

The past two decades have seen more gambling action than the entire history of the state up to that point. The 21st century has truly been a new era for the Volunteer State in this regard. For almost a century, all forms of gambling were illegal in Tennessee.

  • June 1, 1796 – Tennessee becomes the 16th state admitted to the Union
  • 1987Racing Control Act becomes law; many parts never actually implemented
  • June 30, 1997Tennessee Racing Commission terminates its charter
  • November 2002 – Voters approve Amendment 1, authorizing the Tennessee Education Lottery
  • Jan. 20, 2004 – TEL begins selling tickets
  • April 6, 2015 – State repeals Racing Control Act
  • April 28, 2016 – State legalizes DFS contests
  • May 25, 2019Gov. Bill Lee declines to sign or veto bill legalizing online sports betting and March Madness pools, allowing it to become law
  • Nov. 1, 2020 – Sports betting officially launches with four operators going live.